Credit crunch worsens for Irish small businesses

A new survey of Irish small businesses shows that almost half of all respondents felt that credit availability was worse than six months ago.

The County and City Enterprise Board’s (CEB) second half yearly survey reveals that 47 percent of respondents said they had been refused additional credit, compared to 40 percent six months ago. Those who said they had succeeded in getting more credit also fell from 29 percent to 27 percent.

CEB represents the 35 bodies across the country who provide support for small businesses with 10 employees or fewer.

The CEB survey says the current banking situation is having a serious effect on its clients' trading and business operations, with half of respondents saying that it is either serious or very serious.

Over half of respondents say their business was curtailed by banking restrictions, including bank overdraft or bank loan restrictions, additional charges, no processing of loans and higher levels of security demanded.

The CEB noted that businesses are turning to other sources of credit, including credit unions and private investors. The survey also points to a reduced number of businesses using Allied Irish Bank and an increase in the number using Permanent TSB.

The survey also reveals that 34 percent of companies who took part said that their business was at risk of closure -- a higher figure than the last survey (31 percent).

Asked whether employment was at risk in their enterprise, 35 percent said they had already let staff go, 18 percent said staff was at risk over the next six months, while 8 percent said they are currently intending to reduce staff. Another 39 percent said that jobs were not at risk.

“With customers and suppliers holding on to cash for as long as possible and limited working capital available from the banks, many businesses are struggling to meet day to day costs,” commented Michael Tunney, chairman of the CEB Network.

He warns that if the situation continues, many good businesses will be forced to close as a result.